Several tech giants, including Ant Group and JD.com, had been preparing to introduce stablecoins in Hong Kong but have now halted their plans.

Their initiatives were anticipated after Hong Kong’s legislature passed a bill regulating fiat-backed stablecoin issuers, necessitating licenses from the Hong Kong Monetary Authority. Initially, there was hope that this would facilitate yuan-backed stablecoins and expand their reach.

Regulatory Concerns and Market Hype

However, despite these efforts, recent directives from the People’s Bank of China (PBOC) and Cyberspace Administration of China have instructed Ant Group and JD.com to suspend their plans for stablecoins. These authorities expressed concerns over the heightened potential for fraud in the stablecoin market.

The Securities and Futures Commission highlighted that many companies might have taken advantage of the stablecoin hype, seeing a boost in stock prices with any announcement of applying for a license or related news on social media platforms.

Central Bank Digital Currencies (CBDCs) vs. Company-Issued Stablecoins

The PBOC’s decision goes beyond fraud concerns; it reflects broader regulatory considerations. The rise of private companies in the financial sector, particularly tech firms like Ant Group and JD.com, issuing currencies poses a significant challenge.

Some argue that central banks should retain exclusive authority over currency issuance, emphasizing the stability and regulation offered by CBDCs backed by governments. China has made progress with its digital yuan pilot but acknowledges limited use cases and no interest accrual, factors that contribute to its slow adoption compared to company-issued stablecoins.

Despite this, China continues pushing for the digital yuan as an alternative to private stablecoins. For instance, there have been recent requests for companies like Tencent to reduce their mobile payments market share in favor of greater room for the digital yuan to grow and gain traction.